Blank-check firm Digital World Acquisition Corp said it reached an agreement in principle with the Securities and Exchange Commission after the commission began investigating the company’s merger deal with Truth Social owner Trump Media & Technology Group.
The terms are not yet definitive, according to an SEC filing, and the final agreement is subject to approval by the commission.
If it’s approved, the SEC will enter a cease-and-desist order with the company, finding DWAC violated “antifraud provisions” connected to initial public offering filings. Those filings were about “certain statements, agreements and omissions relating to the timing and discussions the Company had” with Trump Media & Technology Group.
Nearly two years ago, former President Donald Trump’s media group agreed to combine with DWAC to bring the company public through what’s known as a SPAC, or a Special Purpose Acquisition Corporation. But the deal has raised eyebrows from legal experts and drawn scrutiny from regulators and prosecutors.
If DWAC amends its IPO filings, it will have to pay the SEC an $18 million civil penalty after the closing of any merger deal.
TMTG is not a party to the settlement, according to the SEC filing, and did not consent to it.
“TMTG may disagree and try to terminate the Merger Agreement,” the SEC filing said.
Neither the SEC nor TMTG could not be immediately reached for comment.
DWAC said in the filing that the settlement in principle is in the best interest of its shareholders and would prevent drawn-out litigation with the SEC.
“DWAC remains ready and willing to consummate a transaction with TMTG to create an alternative media platform and bring value to its shareholders,” the filing said.
Last week, federal prosecutors arrested three investors on insider trading charges related to the deal to take Trump’s media business public. They allegedly made more than $22 million in October 2021 by illegally trading on nonpublic knowledge of the DWAC-TMTG merger.
– CNN’s Matt Egan and Kara Scannell contributed to this report